Exhibit 10.1
EXECUTION VERSION
XXXXXXX & MARSAL, INC.
000 XXXXXXXXX XXXXXX - XXXXX 0000
XXX XXXX, XXX XXXX 00000
(000) 000-0000
FAX: (000) 000-0000
April 11, 2001
Board of Directors
Xxxxxx A.S.L., Ltd.
c/o Xxxx X. Xxxxxx
Xxxx, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
The purpose of this letter is to set forth the terms of the engagement between
Xxxxxxx & Marsal, Inc. ("A&M"), Xxxxxx X. Xxxx (the "Officer" or the "Chief
Restructuring Officer") and Xxxxxx A.S.L., Ltd. (the "Company"), including the
scope of the services to be performed and the basis of compensation for those
services. Upon your execution, this letter will constitute an agreement (this
"Agreement") between the Company, the Officer, and A&M, and will constitute an
amendment and restatement of our previous engagement letter dated October 25,
2000.
1. Description of Services and Duties
(a) During the term of the engagement A&M shall make
available to the Company the services of the Officer.
The Officer shall be duly appointed by the Board of
Directors of the Company (the "Board") at the next
meeting of the Board as its Chief Restructuring
Officer. As such, the Officer shall report directly
to and take directions from the Board and shall, with
senior management, develop for the Board's
consideration proposals that address the Company's
financial and operating performance. It is
anticipated that the organization structure of the
Company will be substantially as shown on the
attached organization charts, and that the Officer
shall work with senior management on the following
activities:
(i) overall management of the Company's
operations;
(ii) the preparation of a revised operating plan
and cash flow forecast and present such plan
and forecast to the Board and the Company's
creditors;
(iii) identification of cost reduction and
operations improvement opportunities through
review of the Company's facilities,
personnel and operating procedures, and the
implementation thereof;
(iv) communications with shareholders and
creditors of the Company and meetings with
representatives of such constituents to
discuss the business operations, financial
performance and general condition of the
Company and the progress made to implement
the operating plan and any modifications
thereof;
(v) other activities as are approved by the
Board and agreed to by A&M from time to
time.
(b) The Officer will continue to be employed by A&M.
During the term of the engagement, the Officer will
devote substantially all of his business time and
efforts to the services and duties set forth in
paragraph 1(a) hereof.
(c) The Company understands that the services to be
rendered by the Officer (and, if applicable, other
A&M personnel) may include the preparation of
projections and other forward-looking statements, and
numerous factors can affect the actual results of the
Company's operations, which may materially and
adversely differ from those projections and other
forward looking statements. In addition, the Officer
(and, if applicable, other A&M personnel) will be
relying on information provided by other members of
the Company's management in the preparation of those
projections and other forward-looking statements. In
the event the Company engages in a financial
restructuring, neither the Officer nor A&M makes any
representation or guarantee that an appropriate
restructuring proposal can be formulated for the
Company, that any restructuring proposal presented to
the Board will be more successful than all other
possible restructuring proposals, that restructuring
is the best course of action for the Company, or, if
formulated, that any proposed restructuring plan will
be accepted by the Company's creditors, shareholders
and other constituents. Further, neither the Officer
nor A&M assumes responsibility for the selection of
any restructuring proposal which the Officer assists
in formulating and presenting to the Board, and the
Officer shall be responsible for implementation only
of the restructuring proposal approved by the Board
and only to the extent and in the manner authorized
and directed by the Board.
Page 2 of 11
2. Compensation
(a) During the term of the engagement, A&M will receive a
monthly fee equal to $185,000 for the Officer and one
additional person who will also be appointed and
serve as an officer of the Company, devoting
substantially all his business time and efforts to
the engagement (such person in such capacity,
together with the Chief Restructuring Officer, the
"Officers"). A&M will assign Xxxx Xxxxxxxx initially
to serve as the additional officer. Any person
provided by A&M to serve as officer and subsequently
appointed as an officer by the Board will be deemed
to be a party to this Agreement without further
execution hereof upon his or her appointment and his
or her written acceptance of such appointment. If
additional A&M personnel are required, A&M will
receive an hourly fee for such personnel based on the
following hourly rates:
Managing Directors $400 - $425
Directors $350 - $400
Associates $275 - $340
Analysts $145 - $220
Such rates shall be subject to adjustment annually at
such time as A&M adjusts its rates generally. A&M
will provide the Company with prompt notice of any
such adjustment.
(b) The Officers and A&M will be reimbursed for their
reasonable out-of-pocket expenses incurred during the
term of the engagement in connection with the
performance of the engagement such as travel, lodging
and telephone charges; provided that the Company
shall have the right to pre-approve any single
expense in excess of $3,000. Upon request, A&M will
substantiate such expenses. In addition, A&M shall be
reimbursed for the reasonable fees and expenses of
its counsel; provided that the aggregate amount of
counsel fees and expenses which the Company shall be
obligated to reimburse A&M for shall not exceed
$12,000. All fees and expenses will be billed and
payable on a monthly basis.
(c) In addition to the monthly fee set forth in paragraph
2(a), A&M shall be entitled to receive incentive
compensation as follows:
i. Upon termination of this Agreement (other
than in connection with a Disposition, as
defined below), incentive compensation shall
become due and payable on the earliest of
(x) the effective date of the termination of
the engagement; (y) December 30, 2001; and
(z) the date on which it is determined by a
court of competent jurisdiction that the
Officers are no longer permitted under
applicable law to perform the services set
forth in paragraph 1 hereof as evidenced by
such court's disqualification of the
Officers or by the authorization to retain
Page 3 of 11
or employ other professionals or other
persons to perform services comparable to
those provided by the Officers. The amount
payable shall be a minimum of $200,000,
increasing to either $450,000 or $500,000 if
the year-to-date "2001 Operating EBITDA"
reaches at least 85% or 100%, respectively,
of the "Fiscal Year 2001 Plan" for the same
period, as both such terms are defined in
clause (iii) below, all as set forth in
Exhibit A attached hereto. Amounts payable
under this clause (i) shall be net of
amounts paid, if any, under clause (ii)
below. If termination occurs after a
Disposition (as defined in clause (ii)
below), then all the financial data used in
the calculations on Exhibit A for the period
following the Disposition shall be adjusted
(including the definition of 2001 Operating
EBITDA) by including operating results only
for those assets remaining after the
Disposition.
ii. Upon a Disposition (as defined below),
incentive compensation shall become due and
payable immediately upon the sale, transfer,
lease or other disposition of all or
substantially all the Company's assets (a
"Disposition"). The amount payable shall be
a minimum of $350,000, increasing to either
$450,000 or $500,000 if the year-to-date
"2001 Operating EBITDA" reaches at least 85%
or 100%, respectively, of the "Fiscal Year
2001 Plan" for the same period, as both such
terms are defined in clause (iii) below, all
as set forth in Exhibit A attached hereto.
Amounts payable under this clause (ii) shall
be net of amounts paid, if any, under clause
(i) above.
iii. Defined Terms:
"Fiscal Year 2001 Plan" shall mean the
forecast reviewed by the Board at its March
21, 2001 meeting as a revision to the 2001
plan originally adopted by the Board in
September 2000.
"2001 Operating EBITDA" shall mean earnings
before interest, taxes, depreciation and
amortization net of other income (expense);
extraordinary items; gains or losses on the
sale of assets, expenses of litigation
(including administrative proceedings) and
related professional fees, fines, damages
and settlement payments; and restructuring
charges (whether or not such expenses would
be treated as restructuring charges pursuant
to generally accepted accounting principles,
including, without limitation, professional
fees and expenses, employee severance and
incentive payments, other than bonus
compensation provided for in the Company's
operating plan) and costs of operations
discontinued or identified to be
discontinued for fiscal year 2001. 2001
Operating EBITDA shall be determined based
on the Company's internal financial
reporting.
Page 4 of 11
(c) Upon the last day on which any amount becomes payable
under the Agreement, A&M shall credit the retainer it
holds in the amount of $150,000, and will return the
remaining balance, if any, to the Company promptly
thereafter.
3. Term
(a) The engagement will commence as of the date hereof
and may be terminated by either the Company or A&M
without cause by giving 30 days' written notice to
the other party. In the event of such termination by
either the Company or A&M, any fees and expenses due
to A&M shall be remitted promptly. A&M shall remain
entitled to the incentive compensation provided for
in paragraph 2(c) hereof, except as provided in
paragraphs 3(b) and 3(c) hereof.
(b) The Company may at any time immediately terminate
A&M's services hereunder "For Cause" by giving
written notice to A&M. "For Cause" shall mean (i)
either of the Officers is convicted of, admits guilt
in a written document filed with a court of competent
jurisdiction to, or enters a plea of nolo contendere
to, an allegation of fraud, embezzlement,
misappropriation or any felony; (ii) either of the
Officers willfully disobeys a lawful direction of the
Board; or (iii) a material breach of any of A&M's or
either of the Officers' material obligations under
this Agreement which is not cured within 15 days of
the Company's written notice thereof to A&M
describing in reasonable detail the nature of the
alleged breach. A&M shall not be entitled to earn any
incentive compensation following the termination of
the engagement by the Company For Cause.
(c) A&M may at any time immediately terminate its
services hereunder for "Good Reason". "Good Reason"
shall mean any material breach of any of the
Company's material obligations under this Agreement
which is not cured within 15 days of A&M's written
notice thereof to the Company describing in
reasonable detail the nature of the alleged breach.
In the event A&M terminates the engagement without
Good Reason, then A&M shall not be entitled to earn
any incentive compensation following such
termination.
Page 5 of 11
4. Relationship of the Parties
The parties intend that an independent contractor relationship
will be created between A&M and the Company by this Agreement.
The Officers shall remain employees of A&M, which shall retain
the rights (subject to the terms hereof) to direct and control
their performance. The compensation set forth in paragraph 2
shall be exclusive, and neither the Officers nor any other A&M
personnel shall be entitled to participate in any other
compensation or benefit plan or perquisite of the Company.
The Company acknowledges that A&M's engagement shall not
constitute an audit, review or compilation, or any other type
of financial statement reporting engagement that is subject to
the rules of the American Institute of Certified Public
Accountants, the Securities and Exchange Commission or any
other state or national professional or regulatory body.
5. No Third-Party Beneficiary
The Company acknowledges that all advice (written or oral)
given by A&M and the Officers to the Company in connection
with the engagement is intended solely for the benefit and use
of the Company (limited to its Board and management and other
professionals as the Board or management may direct from time
to time) in considering the matters to which the engagement
relates. The Company agrees that no such advice shall be used
for any other purpose or reproduced, disseminated, quoted or
referred to at any time in any manner or for any purpose other
than accomplishing the tasks referred to herein or in
discussions with the Company's shareholders or creditors in
connection with such tasks, without A&M's prior approval
(which shall not be unreasonably withheld or delayed), except
as required by law.
6. Conflicts
A&M is not currently aware of any relationship that would
create a conflict of interest with the Company or those
parties-in-interest of which it is aware. Because A&M is a
consulting firm that serves clients on a national basis in
numerous cases, both in and out of court, it is possible that
A&M may have rendered services to or have business
associations with other entitles or people which had or have
or may have relationships with the Company, including
creditors of the Company. In the event you accept the terms of
the engagement, A&M will not represent the interests of such
entitles or people in connection with this matter.
Page 6 of 11
7. Confidentiality / Non-Solicitation
A&M and the Officers shall keep as confidential all non-public
information received from the Company in conjunction with the
engagement, except: (i) as requested by the Company or its
legal counsel; (ii) as required by legal proceedings or (iii)
as reasonably required in communication with the Company's
shareholders, affiliates and creditors, or their advisors, in
the performance of this engagement. The Company agrees not to
solicit, recruit or hire any employees of A&M for a period of
two years subsequent to the termination of this agreement.
8. Indemnification
The attached indemnification agreement is incorporated herein
by reference and shall be executed upon the acceptance of this
Agreement. In addition to the indemnity provided in the
indemnity agreement incorporated herein, each of the Officers
shall be indemnified by the Company for all acts performed as
an officer to the maximum extent permitted by law. The Company
shall afford to each of the Officers directors' and officers'
liability insurance of the same type, terms, deductible,
amounts and tenor as the best such coverage it provides to any
of its officers or directors from the same or a comparable
insurance provider. Termination of the engagement shall not
affect any of these indemnification and insurance provisions,
which shall remain in full force and effect.
9. Miscellaneous
This Agreement (together with the attached indemnity
provisions); (a) shall be governed and construed in accordance
with the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of
conflict of laws thereof; (b) incorporates the entire
understanding of the parties with respect to the subject
matter hereof; and (c) may not be amended or modified except
in writing executed by all parties hereto. Neither A&M nor the
Chief Restructuring Officer may delegate their obligations
hereunder, and any such attempted delegation shall be null and
void and without effect. The Company, the Officers and A&M
agree to waive trial by jury in any action, proceeding or
counterclaim brought by or on behalf of the parties hereto
with respect to any matter relating to or arising out of the
engagement or the performance or non-performance of the
Officers or A&M hereunder. If any provision of this Agreement
is held to be invalid or unenforceable, all provisions of this
Agreement which can be given effect without such invalid or
unenforceable provision shall remain in full force and effect.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
Page 7 of 11
Please sign the enclosed copy of this and the attached Indemnification
Agreement to acknowledge your agreement with their terms.
Very truly yours,
Xxxxxxx & Marsal, Inc.
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx
Managing Director
ACCEPTED AND AGREED to as of the date first written above:
Xxxxxx A.S.L., Ltd.
By: /s/ Xxxxxx Xxxxxx
------------------------------
Xxxxxx Xxxxxx
Chief Executive Officer
/s/ Xxxxxx X. Xxxx
------------------------------
Xxxxxx X. Xxxx
/s/ Xxxx Xxxxxxxx
------------------------------
Xxxx Xxxxxxxx
Page 8 of 11
INDEMNIFICATION AGREEMENT
This indemnity is made part of an agreement, dated April 11, 2001 (which
together with any renewals, modifications or extensions thereof, is herein
referred to as the "Agreement") by and between Xxxxxxx & Marsal, Inc. ("A&M"),
Xxxxxx X. Xxxx (the "Officer") and Xxxxxx A.S.L., Ltd. (the "Company"), for
services to be rendered to the Company by A&M.
A. The Company agrees to indemnify and hold harmless each of A&M, its
shareholders, employees, agents, representatives and subcontractors (each, an
"Indemnified Party" and collectively, the "Indemnified Parties") against any and
all losses, claims, damages, liabilities, penalties, obligations and expenses,
including the costs for counsel or others (including employees of A&M, based on
their then current hourly billing rates) in investigating, preparing or
defending any action or claim, whether or not in connection with litigation in
which any Indemnified Party is a party, or enforcing the Agreement (including
these indemnity provisions), as and when incurred, caused by, relating to, based
upon or arising out of (directly or indirectly) the Indemnified Parties'
acceptance of or the performance or nonperformance of their obligations under
the Agreement; provided, however, such indemnity shall not apply to any such
loss, claim, damage, liability or expense to the extent it is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal) to
have resulted from such Indemnified Party's gross negligence or willful
misconduct. The Company also agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with the engagement of A&M, except to the extent
for any such liability for losses, claims, damages, liabilities or expenses that
are found in a final judgment by a court of competent jurisdiction (not subject
to further appeal) to have resulted from such Indemnified Party's gross
negligence or willful misconduct. The Company further agrees that it will not,
without the prior consent of an Indemnified Party, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which such Indemnified Party seeks
indemnification hereunder (whether or not such Indemnified Party is an actual
party to such claim, action, suit or proceedings) unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Party from all liabilities arising out of such claim, action, suit or
proceeding, which consent shall not be unreasonably withheld.
B. These indemnification provisions shall be in addition to any liability which
the Company may otherwise have to the Indemnified Parties.
C. If any action, proceeding or investigation is commenced to which any
Indemnified Party proposes to demand indemnification hereunder, such Indemnified
Party will notify the Company in writing with reasonable promptness and shall
describe in reasonable detail the nature of such action, proceeding or
investigation; provided, however, that any failure by such Indemnified Party to
notify the Company will not relieve the Company from its obligations hereunder,
except to the extent that such failure shall have actually prejudiced the
defense of such action. The Company shall promptly pay expenses reasonably
incurred by any Indemnified Party in defending, participating in, or settling
Page 9 of 11
any action, proceeding or investigation in which such Indemnified Party is a
party or is threatened to be made a party or otherwise is participating in by
reason of the engagement under the Agreement, upon submission of invoices
therefor, whether in advance of the final disposition of such action,
proceeding, or investigation or otherwise. Each Indemnified Party hereby
undertakes, and the Company hereby accepts its undertaking, to repay any and all
such amounts so advanced if it shall ultimately be determined that such
Indemnified Party is not entitled to be indemnified therefor. If any such
action, proceeding or investigation in which an Indemnified Party is a party is
also against the Company, the Company may, in lieu of advancing the expenses of
separate counsel for such Indemnified Party, provide such Indemnified Party with
legal representation by the same counsel who represents the Company, provided
such counsel is reasonably satisfactory to such Indemnified Party, at no cost to
such Indemnified Party; provided, however, that if such counsel or counsel to
the Indemnified Party shall determine that due to the existence of actual or
potential conflicts of interest between such Indemnified Party and the Company
such counsel is unable to represent both the Indemnified Party and the Company,
then the Indemnified Party shall be entitled to use separate counsel of its own
choice, and the Company shall promptly pay the reasonable expenses of such
separate counsel upon submission of invoices therefor. Nothing herein shall
prevent an Indemnified Party from using separate counsel of its own choice at
its own expense. The Company will be liable for any settlement of any claim
against an Indemnified Party made with the Company's written consent, which
consent shall not be unreasonably withheld.
D. In order to provide for just and equitable contribution if a claim for
indemnification pursuant to these indemnification provisions is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification, then the
relative fault of the Company, on the one hand, and the Indemnified Parties, on
the other hand, in connection with the statements, acts or omissions which
resulted in the losses, claims, damages, liabilities and costs giving rise to
the indemnification claim and other relevant equitable considerations shall be
considered; and further provided that in no event will the Indemnified Parties'
aggregate contribution for all losses, claims, damages, liabilities and expenses
with respect to which contribution is available hereunder exceed the amount of
fees actually received by the Indemnified Parties pursuant to the Agreement. No
person found liable for a fraudulent misrepresentation shall be entitled to
contribution hereunder from any person who is not also found liable for such
fraudulent misrepresentation.
E. In the event the Company and A&M seek judicial approval for the assumption of
the Agreement or authorization to enter into a new engagement agreement pursuant
to either of which A&M would continue to be engaged by the Company, the Company
shall promptly pay expenses reasonably incurred by the Indemnified Parties,
including attorneys' fees and expenses, in connection with any motion, action or
claim made either in support of or in opposition to any such retention or
authorization, whether in advance of or following any judicial disposition of
such motion, action or claim, promptly upon submission of invoices therefor and
regardless of whether such retention or authorization is approved by any court.
The Company will also promptly pay the Indemnified Parties for any expenses
reasonable incurred by them, including attorneys' fees and expenses, in seeking
Page 10 of 11
payment of all amounts owed it under the Agreement (or any new engagement
agreement) whether through submission of a fee application or in any other
manner, without offset, recoupment or counterclaim, whether as a secured claim,
an administrative expense claim, an unsecured claim. a prepetition claim or a
postpetition claim.
F. Neither termination of the Agreement nor termination of A&M's engagement
shall affect these indemnification provisions, which shall hereafter remain
operative and in full force and effect.
G. The rights provided herein shall not be deemed exclusive of any other rights
to which the Indemnified Parties may be entitled under the certificate of
incorporation or bylaws of the Company, any other agreements, any vote of
stockholders or disinterested directors of the Company, any applicable law or
otherwise.
XXXXXX A.S.L., LTD. XXXXXXX & MARSAL, INC.
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxx Xxxx
--------------------------- -------------------------
Xxxxxx Xxxxxx Xxxxxx Xxxx
Chief Executive Officer Managing Director
Page 11 of 11
